AES Reports Adjusted Earnings Per Share Of $0.39 For Third Quarter 2013 And Reaffirms Full Year 2013 Guidance

The AES Corporation (NYSE:AES) today reported Adjusted Earnings Per Share (Adjusted EPS, a non-GAAP financial measure) of $0.39 for third quarter 2013, an increase of $0.04 from third quarter 2012. In addition, third quarter 2013 Diluted Earnings Per Share from Continuing Operations increased $2.29 to $0.17 from third quarter 2012, driven by lower impairment expense. Despite the challenges of dry hydrological conditions in Latin America and a weaker Brazilian Real, Adjusted EPS results for the quarter increased 11%, as a result of a lower effective tax rate, operational improvements and the impact of debt repayment and share repurchases.

"We are pleased with our results for the quarter which, despite the severe drought in much of Latin America, put us on track to meet our full year guidance," said Andrés Gluski, AES President and Chief Executive Officer. "Based on continued strong cash flow, we are raising our dividend by 25% to $0.05 per share, payable in the first quarter of 2014. We also increased our cost savings projections by $55 million by 2015. We continue to execute on our strategy of simplifying our portfolio and this quarter we signed three additional asset sales for proceeds of $236 million. We continue to look for partnership opportunities to tailor our equity exposure to larger projects, while retaining the benefits of scale, and have signed $500 million year-to-date on two development and construction projects."

"We are reaffirming our 2013 guidance on all metrics. Cash generation has been strong this year, and we expect to be at the high end of our target range for Parent Free Cash Flow," said Tom O'Flynn, AES Executive Vice President and Chief Financial Officer. "Accordingly, the Board approved an increase in our dividend, consistent with the target payout ratio we established earlier this year of 30% to 40% of sustainable Parent Free Cash Flow. We continue to create value by returning cash to shareholders and investing in attractive platform expansions."
                 

Table 1: Key Financial Results
                           

Third Quarter

Year-to-date

Full Year 2013
$ in Millions, Except Per Share Amounts

 

September 30,

Guidance
2013 2012 2013 2012
Adjusted EPS 1 $ 0.39 $ 0.35 $ 1.01 $ 0.90

$ 1.24-$1.32
Diluted EPS from Continuing Operations $ 0.17 $ (2.12

)
$ 0.55 $ (1.54

)

N/A
Proportional Free Cash Flow 1 $ 347 $ 501 $ 847 $ 949

$750-$1,050
Consolidated Net Cash Provided by Operating Activities       $ 855   $ 1,015       $ 2,040   $ 2,129      

$ 2,500-$3,100
1 A non-GAAP financial measure. See “Non-GAAP Financial Measures” for definitions and reconciliations to the most comparable GAAP financial measures.
 

Discussion of Operating Drivers of Adjusted Pre-Tax Contribution (Adjusted PTC, a non-GAAP financial measure) and Adjusted EPS

The Company manages its portfolio in six market-oriented Strategic Business Units (SBUs): US (United States), Andes (Chile, Colombia and Argentina), Brazil, MCAC (Mexico, Central America and the Caribbean), EMEA (Europe, Middle East and Africa), and Asia. As discussed on the second quarter 2013 earnings call, the Company's Adjusted EPS and Adjusted PTC for the three and nine months ending September 30, 2013 include adjustments made to results from equity method investments, consistent with adjustments made to results from consolidated subsidiaries. The Company does not control affiliates reported under the equity method, and the Company has made these adjustments because it now has a controlled process for obtaining this detailed information from its equity method investments.
 

Table 2: Adjusted PTC 1  by SBU and Adjusted EPS 1
$ in Millions, Except Per Share Amounts      

Third Quarter
   

Year-to-date September 30,
2013     2012     Variance 2013     2012     Variance
US $ 131 $ 148 $ (17 ) $ 331 $ 315 $ 16
Andes $ 109 $ 108 $ 1 $ 274 $ 268 $ 6
Brazil $ 85 $ 85 $ $ 204 $ 247 $ (43 )
MCAC $ 96 $ 93 $ 3 $ 256 $ 264 $ (8 )
EMEA $ 68 $ 53 $ 15 $ 236 $ 288 $ (52 )
Asia       $ 30       $ 53       $ (23 )     $ 101       $ 141       $ (40 )
Total SBUs $ 519 $ 540 $ (21 ) $ 1,402 $ 1,523 $ (121 )
Corp/Other       $ (132 )     $ (160 )     $ 28       $ (456 )     $ (521 )     $ 65  
Total AES Adjusted PTC 1,2 $ 387 $ 380 $ 7 $ 946 $ 1,002 $ (56 )
Adjusted Effective Tax Rate 26.4 % 33.2 % 21.6 % 33.2 %
Diluted Share Count 747 751 749 763
Adjusted EPS 1       $ 0.39       $ 0.35       $ 0.04       $ 1.01       $ 0.90       $ 0.11  

1 A non-GAAP financial measure. See “Non-GAAP Financial Measures” for definitions and reconciliations to the most comparable GAAP financial measures.

2 Includes $15 million and $25 million of after-tax equity in earnings for third quarter 2013 and third quarter 2012, respectively. Includes $21 million and $49 million of after-tax equity in earnings for year-to-date September 30, 2013 and year-to-date September 30, 2012, respectively.
 

For the three months ended September 30, 2013, Adjusted EPS increased $0.04 to $0.39, as a result of a lower effective tax rate, as well as an increase in Adjusted PTC. A lower effective tax rate represented $0.03 of the increase, and an increase in Adjusted PTC had a $0.01 impact. Adjusted PTC increased modestly, driven by higher dark spreads in the United Kingdom and lower interest expense on recourse debt, mostly offset by the impact of dry hydrological conditions in Latin America. The impact of dry hydrology was approximately $0.04 for the third quarter.

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